Shorting stocks: Broken stocks - Analysis Message Board

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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis

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To: Sir Auric Goldfinger who wrote (1819)	9/23/1998 5:24:00 AM
From: Q.	Read Replies (5) of 2506

Thread: April - August was a very rewarding season for shorting small-cap broken stocks. But is the bear streak over for now? There are two technical indicators I'm looking at: 1. The chart for the Russell 2000, decisionpoint.com looks like the RUT is breaking out. 2. The bottom three weeks ago also coincided with record bearish investor sentiment in the surveys. The 'Consensus' survey was 80% bullish in mid-April, and 17% bullish the first week in September. This is a technical indicator suggesting an intermediate-term bottom. When there is a small-cap rally, broken stocks can bounce back very strongly, despite the bad fundamentals of the underlying companies. A rising tide, as they say. Given what appears to be a less favorable risk profile for shorting small cap stocks, I'm re-allocating by reducing my short exposure. It's only a matter of guessing, of course, what will happen with the market, but that's my guess, to reduce risk. I think shorting small cap broken stocks will be more appealing again in November, with the tax-loss selling season.

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